Barclays was under pressure on Friday after Goldman Sachs said the bank needed to prioritise rebuilding capital over shareholder returns.
Regulatory hurdles have moved against cross-border banks such as Barclays, which will be hit disproportionately by regional ringfencing laws, said Goldman.
Capital ringfences add to uncertainty around Barclays’ litigation costs, its pension deficit and the likely proceeds from the sale of its African bank, said the broker.
“Since the beginning of the year, the capital gap between Barclays and its UK and European investment-bank peers has widened meaningfully,” Goldman told clients. “We believe that Barclays is likely to narrow the capital divergence to peers over time.”
Barclays’ history of favouring asset reductions and dividend cuts means it is unlikely to turn to external sources for capital, which translates to a more muted profit outlook, said Goldman.
It forecast for Barclays to freeze its dividend at 3p until at least 2019, having previously expected a hike to 10p.
Barclays ended 2.6 per cent lower at 206.4p in a positive wider market. The FTSE 100 rose 0.7 per cent, or 49.33 points, to 7,297.43.
Leading the gainers, Pearson jumped 12.4 per cent to 739.5p after sticking by full-year guidance and setting out detail on another round of cost cuts.
Rolls-Royce gained 5 per cent to 853.5p, its highest in nearly two years, on the back of Thursday’s annual meeting and amid trader gossip that a Sunday newspaper had been chasing a story.
Details were elusive so the speculation lent on well-worn themes, such as a national merger or a break-up.
Satellite operator Inmarsat dropped 7.7 per cent to 761p, with both Barclays and Berenberg saying investors should sell into the strength that followed Thursday’s quarterly results.
Barclays worried about excess industry capacity in the next few years once operators bring into service new technologies such as Very High Throughput Satellites, or VHTS, which can transmit about a hundred times the data of a traditional wide-beam satellite.
“Supply is set to increase materially whilst demand growth should be more volatile, [and] technological obsolescence is a question mark with VHTS around the corner,” it said. “With the stock having recovered from its lows, the valuation looks unappealing.”
Aim-listed Fever-tree, the UK’s best-performing flotation in more than a decade, ended flat at £16.40 after Shore Capital turned cautious on the tonic water maker.
While Fever-tree offers strong growth potential from an expansion into the dark spirits market, a valuation of more than 60 times earnings, falling to 30 times after 10 years, looks difficult to justify, said Shore.
